The US 10-year treasury yield surged overnight resulting in equities sell-off across the globe. Emerging Markets Commentator Geoffrey Dennis shared his views and outlook on where the yields are headed and the impact.

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“The bond is selling off, the yields are rising because of this sudden burst of optimism by the US economy, which is probably going to grow potentially 5-6 percent in 2021, which therefore perhaps warrants high yields,” he said.

“What the US bond market is saying is that I don’t like the potential trends in the deficits and in the debt rather than it being a case of worrying about inflation. Against that background, the bond market might have wanted to see a little bit more reaction from the Federal Reserve this week,” he added.

According to him, dollar is stable, emerging market (EM) currencies are very stable. “The dollar is rock-solid. That is pretty good for flows into EMs but unfortunately, even within EMs - when you get headline moves in the US stock markets, there will be an impact on EMs,” Dennis mentioned.

He believes, the dollar news is good for EMs in terms of flows. “If the dollar continues to be on the top side then that is when the money will come back into EMs,” he pointed out.

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(Edited by : Bivekananda Biswas)